DrJLT Economics: Deflation != Stagnation Is the Lesson Not Learnt from the Great Depression E005

I make the case that they learned the wrong lesson from the Great Depression:

Deflation is traditionally caused by an increase in productivity and/or fall in demand. It leads to reallocation of resources and rejuvenation of the economy.

A lot of central bankers say that they're working to fend off deflation, because "debt deflation" led to stagnation in the Great Depression.

In fact, while the GD started off as a deflationary event, it could have been just another end of economic cycle. What aggravated the situation was government intervention that led to high unemployment, which exacerbated deflation.

Today, with QE infinity, the central banks keep zombie companies alive while preventing a reallocation of economic resources, damaging the productivity while keeping demand artificially high. This eventually will lead to run-off inflation + stagnation.

Remember, deflation != stagnation, and stagnation + inflation is worse.

My websites: https://drjlt.com, https://neofiliac.com